Tag Archive: Pravin Gordhan

In 2013 South African Revenue Services collected taxes amounting to R814-billion, an increase of 9.6 percent on total revenue received in 2012.

“More efficient collection systems and the deployment of online technologies such as SARS eFiling have simplified the collection process and made it easier for taxpayers to submit their returns on time,” says Madelein van der Watt, development manager at Sage Pastel Payroll & HR.

“The speed and convenience of using online technology has created a situation where 64% of the total revenue collected for 2012/2013 was received through internet payments.”

Van der Watt adds that the cost of collecting revenue is decreasing thanks to the high technology systems that were put in place as part of the SARS Modernisation Programme. Less human interaction is required as SARS is able to employ fewer people to complete assessments and instead, apply their skills more efficiently. The proof is clearly visible in the numbers supplied by National Treasury. In 2006, 98.8% of returns were paper-based. Today, less than 1% of taxpayers do not submit their returns electronically.

“South Africa boasts a progressive tax system in which the rich subsidise the poor with tax relief being applied in the lower income brackets. There are special rebates applying to individuals in the 65 and 70 age brackets, so elderly people pay less tax.

When Minister of Finance Pravin Gordhan presents the budget on 26 February 2014, we should see this trend continue and expect most of the personal income tax relief to be allocated to lower income earners and the elderly.

Based on the 2012/2013 assessment statistics, 76% of total fringe benefits reported included medical aid payments made by employers on behalf of their employees. A likely increase in the medical aid tax credits for the 2014/2015 tax year will therefore also create welcome relief to many individual tax payers. In addition, medical aid contributors who are aged 65 years and older will also benefit from the tax credit system effective 01 March 2014.

Although tax payers will be glad to put some extra money in their back pockets thanks to personal income tax relief that is most likely to be announced by the Minister of Finance, the relief will be short lived as we can also expect the usual suspects to hit our pockets hard after the budget announcement. “Sin taxes” on alcohol and tobacco products will more than likely be increased to ensure larger revenue collections. Expect an increase on the fuel levy as well and as a result, combined with the recent increase of the repo rate, consumers will have to spend more on their monthly grocery bill.

Minister of Finance Pravin Gordhan calls upon taxpayers every year for input on tax deductions and an area which has been open for debate over the past 3 years is that personal home security expenses should be allowed as a tax deduction due to the lack of service delivery from SAPS and the high occurrence of crime in our country.

To reduce the crime rate, we have to raise the rate of employment in South Africa. Van der Watt says the recent Employment Tax Incentive (ETI) initiative Gordhan introduced as part of the Wage Subsidy proposed in 2010 has been in effect since the beginning of January. The minister is expected to provide feedback in the budget speech on ETI’s expectations in increasing employment for young people aged 18 to 29 years. The legislation allows employers to claim a rebate on their PAYE liability provided their PAYE accounts with SARS are up to date.

The lion’s share of revenue allocation during this year’s budget announcement should likely go to health services, education and social grants. It will be interesting to see whether Eskom and Sanral will receive another round of government funding, especially since e-tolls are now generating revenue since December 2013 and Eskom were allowed a rate increase early last year.

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For more information on the changes that will be announced in the upcoming Budget Speech, on 26 February 2014, book your seat for the Seminar.

A new remuneration limit published in the Government Gazette after being approved by Finance Minister Pravin Gordhan directs employers to adjust their UIF contribution calculations to comply with the new limit from 01 October 2012.

From now on employers must apply a new annual remuneration limit of R174 464 when calculating the 1% contribution deducted from employees and the 1% contributed by employers.

“As a result, employees earning R14 872 or more a month (R178 464 a year) will now contribute a maximum of R148.72 and their employers will contribute an equal amount,” says Philip Meyer, technology director of payroll and HR software specialist Pastel Payroll, part of the Softline Group and Sage Group plc.

“At the moment the earnings limit is set at R12 478 a month or R149 736 a year. The new limit means that employees whose earnings exceed the current limit will see a reduction in their net pay from October 2012 as their UIF contribution deduction will be slightly higher to accommodate the remuneration limit increase.

“Employers will see a similar effect as their portion of the UIF contribution increases to ultimately result in an increase in salary related expenses.”

Meyer adds that companies without payroll software solutions will have to manually change or update their payslip calculations to apply the new UIF limit before processing any salaries or wages for October.

“For our Pastel Partner Payroll software users a ‘frictionless’ update is being released to ensure users of the software can process their payrolls using the latest UIF remuneration limits, therefore no CD installations are required.”

There is approximately R20 billion in debt following the much publicized Gauteng toll gate project. In his budget speech Pravin Ghordan announced a special appropriation of R5.8 billion against this debt, meaning that we should see the toll levy drop from 40c to 30c per kilometre. But does this really help us given his later announcement that the fuel levy would be increased by 20c. Feels like robbing Peter to pay Paul.

By Karen Schmikl, Legislation Manager at Softline VIP, part of the Sage Group plc.

Quite a few changes were made during Finance Minister, Pravin Gordhan’s Budget Speech on Wednesday, 22 February 2012 that will have a direct impact on payroll administrators across South Africa.

Medical Aid

The most noteworthy is a change in the taxation of medical aid contributions from March 2012. Payroll administrators will have to ensure that their payroll systems are updated as from 1 March 2012 to reflect the changes stipulated. Not implementing these changes in the first period of the new tax year will result in incorrect PAYE, SDL and UIF contributions.

Medical tax credits replace the medical aid cap amounts used over the past few years.

Individuals who are 65 years and older still have the benefit of a medical aid tax deductible deduction, subject to no limit.

Employees who are younger than 65 however, no longer have the benefit of a medical aid tax deductible deduction. They do however qualify for a monthly medical tax credit (MTC).

The MTC will be deducted from the tax calculated for the employee for each month the employee contributes to a medical scheme, reducing the employee’s tax due each month.

The MTC is calculated in relation to the number of beneficiaries on the medical aid – the values are R230 for the main member, R230 for the first dependent and R154 for each additional dependent

The result of this change is a more equitable benefit for all individuals who belong to medical aids. Lower income employees will ‘see’ a greater tax benefit than higher income employees when comparing February and March tax amounts.

Tax Tables

The tax tables for individuals and special trusts for the year ending 28 February 2013 were updated.

Taxable Income (R)

Rate of Tax (R)

0 – 160 000

18% of taxable income

160 001 – 250 000

28 800 + 25% of taxable income above 160 000

250 001 – 346 000

51 300 + 30% of taxable income above 250 000

346 001 – 484 000

80 100 + 35% of taxable income above 346 000

484 001 – 617 000

128 400 + 38% of taxable income above 484 000

617 001 and above

178 940 + 40% of taxable income above 617 000

The tax rebate amounts have also been changed. The primary tax rebate amount has been adjusted to R11 440, while a secondary rebate for persons of 65 years and older is pegged at R6 390. A tertiary rebate for persons of 75 years and older is set at R2 130.

The adjustment to the tax threshold amounts, effectively nullified Standard Income Tax on Employees (SITE) limits. Below the age of 65, the tax threshold has been set at R63 556; Ages 65 to below 75 now have a tax threshold of R99 056; while Ages 75 and over have a tax threshold of R110 889.

Subsistence Allowance
An employee is entitled to receive a subsistence allowance when the employee is obliged to spend at least one night away from his or her usual place of residence. The value of the deemed allowance or advance where the accommodation is in the RSA has been amended to R303 per day for meals and incidental costs and R93 per day for incidental costs only. The schedule of rates for accommodation outside the RSA will be gazetted towards the end of the month.

Travel Allowance

Travel allowance costs have also been adjusted. The SARS deemed rate per kilometre increased from R3.05 to R3.16. The fuel and maintenance cost values have furthermore been amended and it is advisable to recalculate the value of all employee travel allowances from March 2012.

Value of the vehicle (incl. VAT)

Fixed cost

Fuel cost

Maintenance cost

(R)

(R p.a.)

(c/km)

(c/km)

0 – 60 000

19 492

73.7

25.7

60 001 – 120 000

38 726

77.6

29.0

120 001 – 180 000

52 594

81.5

32.3

180 001 – 240 000

66 440

89.6

36.9

240 001 – 300 000

79 185

102.7

45.2

300 001 – 360 000

91 873

117.1

53.7

360 001 – 420 000

105 809

119.3

65.2

420 001 – 480 000

119 683

133.6

68.3

exceeding 480 000

119 683

133.6

68.3

The changes lined out in Finance Minister, Praveen Gordhan’s Budget Speech will have far reaching effects on any payroll system. It is advisable for employers to take note of these changes and to confirm that they are being applied to their payroll system in order to keep the company current and up to date with legislation.

Finance Minister Pravin Gordhan delivered a safe, no real surprises budget [yesterday] ([Wednesday] 22 February) with R9.5-billion personal tax relief achieved by increasing the personal tax brackets. This brings the primary annual tax rebate for individuals under the age of 65 to R11 440, for individuals aged between 65 and 75 to R6 390 and those aged 75 and older to R2 130.

A key feature of the budget is that tax revenue stabilised at about 25% of South Africa’s gross domestic product (GDP). Overall revenue was slightly lower than the estimate in February last year and the revised estimate for 2012/13 is R739-billion, which is R10-billion higher than projected last year. Also pleasing was reductions in the rates of tax on small businesses and in the compliance burden on micro businesses.

It is proposed that from March 2014 an employer’s retirement fund contributions on behalf of an employee will be regarded as a taxable fringe benefit in the hands of the employee. Individuals will be allowed to deduct up to 22.5% of the higher taxable income or employment income for contributions to pension, provident and retirement annuity funds to a maximum of R20 000 and an annual maximum of R250 000. For individuals of 45 and over the deductible amount is up to 27.5% with a minimum annual deduction of R20 000 and annual maximum of R300 000.

There is a major change relating to medical aid where from 1 March 2012 the capping system will be replaced with a medical aid tax credit, bringing in equality for all taxpayers under the age of 65 and improved benefits for lower earners, a move in line with international best practice. The medical aid tax credit is R230 a month for the first two beneficiaries (including the principal member) and R154 for each additional dependent thereafter. Taxpayers over the age of 65 will receive their full medical aid contribution as a tax deduction in 2014.

Comments Grant Lloyd, managing director of payroll and HR software specialist Softline Pastel Payroll, part of the Softline and Sage Group plc: “The medical aid tax credit system will likely result in lower earners receiving greater benefits, which is a good thing.”

He adds that the Site tax portion of PAYE will fall away, making payroll administration easier.

“Secondary Tax on Companies (STC) will be terminated on March 31 this year and a withholding tax of 15% on dividends is to be introduced on April 1. The tax will be withheld on payment, not on declaration. South African branches of foreign resident companies are exempt from STC.”

Capital gains tax rates have effectively been increased to 13.3% for individuals, 18.6% for companies and 26.7% for Trusts, effective March 1.

Most individual taxpayers will be affected by the introduction of a 20-cent levy on fuel and an 8-cent levy for the Road Accident Fund.

To assist SME businesses with the changes outlined in the new Budget, Softline Pastel Payroll is incorporating all of the Budget changes to tax bracket values, medical aid benefits, and tax relief rebates.

“Automated Payroll and HR software ensures that payrolls are accurate and legally compliant the moment the new Budget stipulations take effect in the new tax year,” says Lloyd.

To find out how the Budget Speech affects your pocket, visit www.pastelpayroll.co.za and enter your current monthly salary and allowances in the online Pastel Salary Tax Calculator.

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The Sage Group provides business software, services and support to small and medium sized businesses. Whilst the heritage is in the SME market, the company also has the experience and expertise to deal with the requirements of specific industries and larger organisations. Core solutions cover accounting, ERP, Payroll and HR, Business Intelligence, customer relationship management and retail software solutions to small, medium and larger sized companies.